Finance

Who are the world's biggest tax avoiders?

by Avaaz Team - posted 06 December 2012 18:32
US citizens protest the amount of tax paid by large companies in New York City
US citizens want answers (AFP/Getty)

Know anyone who pays just 1.9% in tax every year? Didn't think so. Yet global behemoths like Amazon, Apple and Google are using increasingly sophisticated, elaborate (and totally legal) book-keeping tricks to game the system and avoid billions in taxes.

Politicians and the public are now starting to ask why companies that make huge profits are able to get off so lightly, forcing regular taxpayers to shoulder more of the burden. Clearly, the tax codes need to be cleaned up and these outlandish loopholes closed. But in the meantime, let's name and shame (in no particular order) a few of the worst offenders.

1) Amazon

The massive online retailer has made aggressive use of European tax laws to play low-tax countries off each other. By splitting into numerous subsidiaries, and funnelling income through places such as Switzerland and Luxembourg, Amazon has been able to slash its tax bills. According to an investigation by Reuters, Amazon has skilfully juggled payments between its various international units so as to shield itself from well over a billion dollars in US taxes, despite revenue of $39.82bn in the first three quarters of 2012.

2) Ebay

The online auction site has used similar tactics to avoid taxes. By setting up a unit headquartered in Luxembourg while keeping its main European offices in Switzerland, Ebay has been playing both sides against the middle. Although it sells products all over Europe, the company officially records its Luxembourg unit as the place where its European sales happen, allowing it to charge customers that country's lower sales tax, or value-added tax (VAT). Luxembourg's standard VAT rate is 15%, compared with the UK's 20%. On the other hand, it pays its income taxes at the lower corporate Swiss rate. (Switzerland declares its corporate tax rate as between 13 and 22%.) Ebay paid 3% average income tax on overseas earnings over the last four years. Needless to say, tax officials in the UK, Germany and France are taking a sceptical look at this arrangement.

3) Apple

The world's most profitable tech company is headquartered in Cupertino, California. But it set up an office in Reno, Nevada, to collect and invest its profits. Why? Because California's corporate tax rate is almost 9%, and Nevada's is zero.

The New York Times notes that this is just one of Apple's many tax avoidance tricks: "As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world."

4) Cisco Systems

The world's largest maker of network servers and similar equipment has saved $7bn in income taxes since 2005 by claiming its profits at a Swiss subsidiary. Cisco also uses the standard shell game of subsidiaries in Switzerland, Bermuda and the Netherlands to reduce its tax rate on its annual sales of about $20bn to about 5% per year.

Cisco CEO John T Chambers also led an effort last year to lobby Congress to declare a "tax holiday" that would allow corporations to bring their offshore profits back to the US without paying taxes on them.

5) Google

The global search engine giant – launched in 1995 with the slogan "Don't be Evil" – cut its taxes by more than $3bn in recent years by moving profits between foreign units in Ireland and the Netherlands to Bermuda. According to Bloomberg News, Google’s "income shifting – involving strategies known to lawyers as the Double Irish; and the Dutch Sandwich – helped reduce its overseas tax rate to 2.4%, the lowest of the top five U.S technology companies by market capitalisation, according to regulatory filings in six countries."

6) Bank of America

One of the US's "too-big-to-fail" banks, Bank of America received a $1.9bn tax refund from the US tax authorities in 2010, even though it made $4.4bn in profits.

That's right; a tax refund. This in the same year that Bank of America got a $1tn bailout from the Federal Reserve and the Treasury Department.

7) Exxon Mobil

Exxon Mobil made $19bn in profits in 2009. According to SEC filings, Exxon not only paid no US federal income taxes, it actually received a $156m rebate.

8) Starbucks

The Seattle-based coffee juggernaut, worth over $40bn, has been telling tax officials in the UK, Germany and France that it's losing money there, hence it needs to pay no income tax. At the same time, Starbucks officials have been telling investors that its UK operation is doing just splendidly. How does Starbucks explain this discrepancy? According to Reuters, Starbucks chief financial officer Troy Alstead said the company "simply used a different measure of profit when reporting its performance to investors and when filing its tax returns."

But the good news is that pressure works: Starbucks has finally agreed to do the right thing. The company will pay as much as £20m in corporation tax in the UK over the next two years as a response to public anger – regardless of whether or not they are profitable. Starbucks said the hostility surrounding the tax issue had "taken us a bit by surprise", and that the move was an attempt to rebuild the trust of its customers. Other large companies should take heed.

All these corporations go to great lengths to insist they follow all applicable tax laws and that everything they do is completely legal. They're probably right. And it's understandable that companies do all they can to minimise their tax bills.

But at a time when austerity and cuts to social services, infrastructure, education, pensions, healthcare and more are eroding the lives of working people, how can we allow insanely profitable corporations to pay such a tiny fraction of the tax rates that ordinary citizens have to shell out each month from their hard-earned wages?

Learn more: Watch Vermont US Senator Bernie Sanders smack down the top 10 corporate tax avoiders in the US:

Also, read the Tax Gap, an excellent series in the Guardian detailing how corporations game the system to avoid paying their fair share.

Sources: Avaaz, Reuters, New York Times, Bloomberg, Switzerland Tax Rates, Bloomberg, Mother Jones, Chicago Sun Times, Senator Bernie Sanders, BBC, Guardian

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